GNPC yet to establish reserve fund
The Ghana National Petroleum Corporation (GNPC) has not yet set up a reserve fund to finance its long-term operations, as mandated by the Petroleum Revenue Management Act. This is despite the impending expiration of its 15-year allocation of petroleum revenue in 2026, which began in 2011.
Currently, GNPC receives 55% of the Carried and Participating Interests (CAPI) to fund its operational expenditures. However, with the 2026 cutoff approaching, concerns are mounting over the corporation’s ability to sustain its activities without external funding.
A 2024 semi-annual report by the Public Interest and Accountability Committee (PIAC) revealed that GNPC has yet to save funds for its operations post-2026.
“When the government then decides not to fund them, how are they going to fund their operations? We are recommending that they should actualize their own reserve funding so that once they’re able to put aside some monies, they will be able to build up enough revenues to support their operations,” stated Richard Elimah, PIAC’s Technical Advisor.
Stakeholder engagements on oil revenue accountability
PIAC recently held engagements in the Ashanti Region to discuss its findings and emphasized the need for proper utilization of oil revenues. The committee urged the government and GNPC to take swift action to establish the reserve fund and ensure financial sustainability in the sector.
IOCs owe over $2.6m in surface rentals
Meanwhile, ten international oil companies (IOCs) owe the government over $2.6 million in surface rental fees for the first half of 2024, according to the PIAC report. Alarmingly, four of these companies have exited the country without clearing their debts, leaving the government at risk of losing significant revenue.
PIAC recommended that the government enforce payment of surface rental fees during production to prevent further losses.
“PIAC is recommending that the government takes the surface rental before these companies leave the country. So, they should be made to pay during the course of the production. This would ensure the state doesn’t incur any losses,” Mr. Elimah emphasized.
Concerns over lack of new areements
Adding to its concerns, PIAC criticized the government’s decision to halt the signing of new petroleum agreements since 2018. The committee warned that this decision could adversely impact future revenue generation for the country.
GNPC’s role and revenue allocation
GNPC, established in 1983, plays a key role in Ghana’s oil and gas sector, serving as the state agency responsible for exploration, development, and production activities. Since 2011, it has relied on petroleum revenue allocations under the Petroleum Revenue Management Act to fund its operations.
The CAPI arrangement allows GNPC to cover its operational expenses, but with the sunset clause of 2026 approaching, the corporation faces a pressing need to secure alternative financing mechanisms to maintain its activities and avoid disruptions to Ghana’s energy sector.
Outlook The establishment of a GNPC reserve fund, proactive collection of outstanding surface rentals, and resumption of new petroleum agreements are crucial steps to strengthen Ghana’s oil and gas sector. These measures will ensure the sector remains a significant contributor to the nation’s economic development and mitigate the risk of revenue losses in the future.
